Markets wrap: Investors punish Synlait for downgrade, kiwi lifts v aussie

Wednesday, 26 April 2023

Synlait investors sold the stock after the company downgraded its profit forecast.

Investors punished milk processing company Synlait for downgrading its earnings forecast for this year by about $20 million, pushing the company’s shares to a record low.

Synlait Milk shares slumped 27% to $1.56 on the NZX on Wednesday, making it the biggest decliner on the sharemarket.

The company said it expects to report anything from a loss of $5m to a profit of $5m in the year to the end of July. That’s down from its previous expectation for a profit of $15m to $25m, and below last year’s $38.5m profit.

Synlait attributed $16.5m of the downgrade to weaker demand from one of its customers.

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The a2 Milk Company, which outed itself as the Synlait customer referred to in the announcement, said it was surprised at the extent of the reduction in Synlait’s guidance.

A2 Milk said its revenue growth for this year would be at the lower end of its previously announced expectations for low-double digit percentage growth, at about 10%. English label infant formula revenue was expected to be down to mid-single digits, partially offset by strong double-digit growth in China label infant formula, it said.

Shares in a2 Milk dropped 5.5% to $5.90.

Auckland International Airport shares were the biggest stock traded by volume and value on the NZX, with $33m of its shares changing hands after public feedback on the mooted sale of Auckland council’s shares was released.

It found the biggest response from individuals was in favour of retaining the entire shareholding (34%), while the smallest response was in favour of selling all the shares (25%), and 28% favoured a partial sell down.

In a Kantar public opinion poll commissioned by the council, only 24% favoured selling all the airport shares, 17% opposed any sale and 52% favoured some being sold.

Mayor Wayne Brown’s preferred option is to sell the entire 18%shareholding to reduce debt and the accompanying interest costs, but Stuff understands councillors are divided on it.

Shares in the airport company gained 0.3% to $8.78.

Retirement village company Summerset told shareholders at its annual meeting in Wellington that it remains on track with its targets for this year.

“We remain optimistic for the year ahead and that we are well prepared to deal with an uncertain economic period in 2023 while continuing to grow,” said chairperson Mark Verbiest.

NZME is operating in “very challenging” economic conditions. (File photo)

“We have a prudent capital structure, we can flex our build rate as demand dictates, we are focused on our cash generation, and we’ll continue to closely monitor our costs during this period.”

Chief executive Scott Scoullar said that while challenging labour supply issues continue to exist, product supply challenges have improved.

Scoullar said the company was on track to meet its guidance to build between 625 and 675 new homes this year.

Summerset is one of the country’s biggest residential builders and last year built 651 units across 12 villages. It has the largest New Zealand landbank in the sector with capacity for 5224 units.

Shares in Summerset slipped 0.6% to $8.17.

Media company NZME, which owns various radio stations and mastheads including the New Zealand Herald, advanced 0.9% to $1.07.

Chairperson Barbara Chapman told shareholders at the annual meeting in Auckland that the company was operating in “very challenging” economic conditions, with inflation contributing to rising prices and cost pressures, with overall business confidence levels being very low.

The company was focused on managing costs in response to lower advertising revenue, she said.

“For NZME, the significantly quieter real estate market, with fewer new listings, has had a real impact on our OneRoof business and plays a key role in some of the challenges we are experiencing,” she said.

Chief executive Michael Boggs said the operating environment continued to be uncertain with first quarter advertising revenue weaker than the same time last year, although the company was seeing an improving trend for bookings next month.

He said there had been a significant reduction in new real estate listings in the final quarter of last year, and the trend had continued into the first quarter of this year.

“We expect it may be some time before we see an improvement in this trend,” he said.

Boggs expects earnings this year of $59m to $64m before interest, tax, depreciation and amortisation. That’s lower than last year’s ebitda of $64.7m.

The benchmark S&P/NZX 50 Index slipped 0.8%, or 91.413 points, to 11,934.98. On the broader market 40 stocks rose and 87 fell with $138m shares traded.

The New Zealand dollar rose to A92.84 cents from A92.65c after the Australian Bureau of Statistics said Australian inflation fell to 7% in the March quarter, from 7.8% in the December quarter, and 7.3% in the September quarter.

Market pricing suggests the Reserve Bank of Australia will keep interest rates on hold next Tuesday, and won’t increase rates any further in this cycle, said Westpac head of New Zealand markets strategy Imre Speizer.